Fanning Chicken Corporation processes and packages chicken for grocery stores. It purchases chickens from farmers and processes them into two different products: chicken drumsticks and chicken steak. From a standard batch of 15,000 pounds of raw chicken that costs $7,750, the company produces two parts: 2,800 pounds of drumsticks and 5,000 pounds of breast for a processing cost of $4,025. The chicken breast is further processed into 4,200 pounds of steak for a processing cost of $1,900. The market price of drumsticks per pound is $1.50 and the market price per pound of chicken steak is $3.90. If Fanning decided to sell chicken breast instead of chicken steak, the price per pound would be $2.30. Required a-1. Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the allocation base. a-2. Calculate the gross profit for each product. a-3. If the drumsticks are producing a loss, should that product line be eliminated? b-1. Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market values as the allocation base. b-2. Calculate the gross profit for each product. C-1. Should Martin further process chicken breasts into chicken steak? (Use the assumption made in requirement b-7). C-2. How would the profit be affected by your answer in c-r? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req A3 Req B1 Req B2 Reg C1 Req c2 Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the allocation base. (Round "Allocation rate" to 2 decimal places.) Product Allocation Rate x Weight of Base Allocated Cost Drumsticks = Chicken breast X Total allocated cost Req A1 Req A2 Req A3 Req B1 Req B2 Reg C1 Req c2 Calculate the gross profit for each product. Chicken Drumsticks Chicken Breast Revenue Cost of goods sold Gross margin Req A1 Req A2 Req A3 Req B1 Req B2 Reg Ci Req C2 If the drumsticks are producing a loss, should that product line be eliminated? The drumstick product line be eliminated. Req A1 Req A2 Req A3 Req B1 Req B2 Req C1 Req c2 Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market values as the allocation base. (Round intermediate calculations and final answers to 2 decimal places.) Total cost of drumsticks Total cost of chicken breasts Req A1 Req A2 Req A3 Req B1 Req B2 Req c1 Req C2 Calculate the gross profit for each product. (Round intermediate calculations and final answers to 2 decimal places.) Chicken Drumsticks Chicken Breast Revenue Cost of goods sold Gross profit Req A1 Req A2 Req A3 Req B1 Req B2 Reg C1 Req C2 Should Fanning further process chicken breasts into chicken steak? (Use the assumption made in requirement b-1). Fanning should can further process chicken breasts into chicken steak. Req A1 Req A2 Req A3 Req B1 Req B2 Req C1 Req c2 How would the profit be affected by your answer in c-1? Effect on profit
